Reverse Jade Lizard

It's the mirror image of a jade lizard. A jade lizard has a naked put + call spread (bullish bias, no upside risk). A reverse jade lizard has a naked call + put spread (bearish bias, no downside risk). The structure is 'reversed'.

Yes, because naked calls have unlimited upside risk (stocks can rise infinitely), while naked puts have substantial but limited downside risk (stocks can only fall to zero). The reverse jade lizard's unlimited risk makes it inherently riskier.

You have two choices: 1) Accept the residual downside risk (you'll lose if stock crashes past long put), or 2) Narrow the put spread width or choose different strikes until credit ≥ width. Most traders insist on eliminating downside risk.

If structured correctly (credit ≥ put spread width), a crash results in zero loss or even a small profit. The put spread loses money, but the credit covers it. This is the key benefit of the reverse jade lizard.

Naked calls have UNLIMITED risk because there's no ceiling on stock prices. A short squeeze, takeover bid, or momentum rally can cause losses far exceeding your original premium. Always respect this risk.

Monitor ex-dividend dates. If your call is ITM and the remaining time value is less than the dividend, assignment is likely. Close or roll ITM calls before ex-dividend to avoid early assignment.

It depends on whether you can roll for a credit and if your thesis is still valid. If you can roll up and out for a credit and believe the stock will stall, roll. If resistance has broken and you expect continuation, close and take the loss.

Size based on a realistic worst-case scenario, not unlimited risk. Calculate loss if stock rallies 20-30% and ensure that loss is within 5-10% of your account. Never size based on premium received alone.

A strangle has unlimited risk on BOTH sides. A reverse jade lizard has unlimited risk only on the upside (naked call), while the put side is a spread with defined risk. If structured correctly, the downside has ZERO risk.

Most retirement accounts don't allow naked calls due to the unlimited risk. You would need an account with the highest option approval level and substantial margin capability. Iron condors are typically more suitable for retirement accounts.

Check: 1) Short interest ratio (days to cover > 5 is concerning), 2) Short interest as % of float (>20% is risky), 3) Borrow rate (high rates indicate squeeze potential), 4) Social media sentiment, 5) Unusual call option activity. Avoid stocks failing multiple screens.

Enter at IV Rank > 40% with credit > put spread width. Screen for squeeze risk. Target 45 DTE entry. Exit at 50% profit or 21 DTE. Use 2-3% risk per position. Limit total portfolio to 3 concurrent reverse jade lizards. Cap sector exposure at 1 position.

High-beta stocks amplify market rallies. Multiple high-beta reverse jade lizards create concentrated upside risk in market rallies. Diversify across betas and consider low-beta names for reverse jade lizards.

Some traders accept small downside risk if: 1) The credit is still excellent, 2) They're very confident stock won't crash, 3) The downside risk is minimal (e.g., credit is 90% of width). This is a judgment call based on conviction.

Model scenarios: 30% stock rally in a week, squeeze scenario to 2x price, gap up on takeover announcement. Calculate margin calls, portfolio drawdown, and whether you can survive these scenarios. Size so that worst-case is survivable.